Posts Tagged ‘loans’

Starting January 1, 2010 all lenders will be required under the Department of Housing and Urban Development (HUD) to use a uniform Good Faith Estimate of closing costs. Under this new rule, lenders will no longer be able to charge a laundry list of lender fees such as processing, underwriting, closing, post-closing etc… which in the past was a tactic to squeeze more money from unsuspecting borrowers at the last minute. With this new form borrowers will have a simple way to see exactly what lenders are making. The money a mortgage company makes for all their work will be shown as the Origination Fee and/or the Yield Spread Premium which will also be disclosed. In addition, if the lender’s fees at the closing table end up being higher than what was quoted on the Good Faith Estimate, the lender may be obligated to refund the difference to the borrower. In fact, for the first time in 30 years the Uniform Residential Settlement Statement or HUD-1 has also been changed. Now, buyers/borrowers will have both the figures that were quoted to them in the Good Faith Estimate and the final figures that are charged at closing all on one document. This is great news for buyers/borrowers. Thanks to these regulations we should see more transparency and accountability by the lending industry. The only thing is what about the secondary market? Why do we not see regulatory agencies coming down on the investment banks that fueled the fire by demanding hundreds of Billions of Dollars of mortgages in order to spin off high risk mortgage paper through credit default swaps and other complicated slight of hand tactics to lure investors looking for high yield returns. Have we really learned anything from the “junk bond” days?

For those of you who have been thinking the housing market is bottoming out, don’t believe everything you read. FNMA has put a moratorium on evictions since October 2008, and every lender under the sun has pretty much followed suit. Come June, auctions and particularly evictions will again raise their head. The loan modification programs have had little effect and many homeowner who were able to modify their loans have begun to get behind in their payments in as fast as 90 days. Thankfully, it’s not the end of the world. Real estate will recover, prices will bottom out, and buyer’s purchase power will increase again once credit policies loosen.

If you’re in Texas be glad. According the the Texas A&M Real Estate Center, the number of real estate transactions have experienced double digit drops. However, house values over all have remained relatively flat. In fact, in some micro-markets real estate valuations have actually continued to climb.

For now, if getting good deal by buying a foreclosure is what you’re after, “caveat emptor”.

1. Trust only agents that know how to work with foreclosed properties. Especially first time home-buyers. I’ve heard the stories and have seen the tears. Give yourself plenty of time to close; 60 days is a good idea.

2. Make sure to ask for everything upfront. Once you’ve contracted on a deal try to stick with it. If the house is really what you want then don’t loose site of what’s really important. The amount of channels, hoops and red tape that sales managers for institutional banks and asset management companies have to go through when additional consideration is requested based off a repair could jeopardize the entire deal. Some sellers are now offering their own home warranty solution in order to cover mechanical devises that break down once you move in.

3. If the house has been vacant for a while, their’s usually a reason for it. Sellers of distressed assets will typically fix the big things, like foundation. However, be careful of houses with pools. Usually they’re only boarded up. The reason, pool companies will charge 10’s of thousands of dollars to fix a pool. So the banks typically don’t even mess with fixing them.

4. Try an auction. Yes, auctions are coming back. If you remember in the late 80’s and early 90’s when you could buy a house at an auction at a great deal you may want to consider going to a few. Keep in mind, the best deals are going to be those properties that have been sitting vacant for quite some time relative to other homes in the neighborhood.

Foreclosures can be a good deal but make sure you know what you’re getting in to. You can check out foreclosure listings on my website, http://www.CharlesGalati.com.